Measuring Promises or Relying on Trust?

A few weeks ago I turned on the radio and heard an all too familiar story of migrant workers churning out products for a big global brand – in poor conditions, for low wages and with allegations of abuse and poor treatment.

Surely it shouldn’t happen.   In the UK any organisation over £36m turnover that supplies goods or services needs to publish and demonstrate compliance with a Modern Slavery statement.  That’ll fix it.

Or will it.  The global brands embarrassed in this BBC report https://www.bbc.co.uk/news/av/world-asia-49448757/migrant-workers-exploited-in-japan were linked to abuse of a Government Scheme in Japan that involves thousands of businesses where Chinese workers are employed as interns coming to earn money and learn skills, but instead – in this case – were treated pretty much as slave labour.

The companies involved deny the abuse, but the BBC feature makes some very compelling points where the workers present the evidence they themselves hold.

The brands involved were fashion brands – Comme Des Garcons and Barneys New York – whose clothes retail for hundreds of pounds.  Their clothes are worn by the likes of  Bjork, Drake, Kanye etc.  

The allegations put the brands in an embarrassing position and their responses appear mealy-mouthed in the face of media criticism.   

The companies distance themselves from the factories with them being used as a result of “uncontrolled outsourcing in their supply chain”.    Comme des Garcons say that they insist on strict conditions with regard to staff working conditions and health and safety for all of the factories that they work with.   In this case the factory was used by a sub-contractor without their knowledge or consent.   Whilst they do say that the subcontractor is taking due action – they are clearly still working with them on an assurance that this will never happen again.

I’ve talked about the damage uncontrolled sub-contracting can cause before.  In High Heels and Bad Reputations it was a female employee being sent home for not wearing high heels that caused outrage and embarrassment for PWC in the national press – but it was the supplier of their reception services who had been responsible.

But can you really control an overseas supplier who outsources?  Procurement processes should absolutely nail down what a supplier can and can’t do in this regard – but how can an organisation really ensure compliance?   

As a minimum contracts and agreements with suppliers should include information rights, warranties and undertakings for compliance with the Modern Slavery Act and with the company’s anti-slavery policy.  Contractual provisions should cover compliance by sub-suppliers as well as the immediate supplier.   They should also specify that the supplier will ensure that any arrangements that it has with sub-suppliers will include audit rights and obligations to respond to due diligence requests raised by your company. 

Auditing these agreements can create a big overhead.  And in a case like the Comme Des Garcons incident above – would an audit really reveal that uncontrolled out-sourcing has taken place?   The reality is that much of the compliance work to support any Modern Slavery Act Transparency Statement will ultimately be supported by supplier questionnaire (which is ultimately self-declaration).

It serves to underline that the importance of supplier due diligence cannot be overlooked.  It also shows that protecting reputation and brand value requires an enlightened approach and that there’s lot of advantages in sourcing locally.